That view is false.įor each individual involved, every trade yields a surplus of value over cost. The mistaken patriotic protectionism pitch is also aided by a distorted view of trade deficits and surpluses, which sees outflows of financial claims that accompany nations’ trade deficits as proof that their citizens are harmed. And when we take into account the adverse effects on domestic consumers, it destroys the patriotic protectionist story, because patriotism does not imply that our government should help our producers beggar our consumers in a negative-sum wealth-transfer game.
The essence of protectionism is our producers conspiring with our government to harm our consumers. The American producer versus foreign producer story, in which patriotism supposedly directs us to favor “our” producers over “their” producers, omits the central issue. That is, their only way to advance their own interests is to act as American consumers’ friends, unlike American producers who are targeting them, abetted by their government. The reason is that their only means of inducing Americans to buy from them is by offering a better deal than they find available domestically. It can assist domestic anti-competitive efforts via regulations (e.g., agricultural marketing orders and crop price supports) and government barriers to entry and competition (e.g., licensing restrictions), as well as import tariffs, quotas and other restrictions (e.g., protectionist policies that pretend to protect health and safety), to restrict foreign competition.Īnother way of putting it would be, “With friends like that, who needs enemies?” which The Yale Book of Quotations attributes to Comedian Joe Adams.įortunately, the bad guys in the patriotic protectionism story, foreign producers, are actually American consumers’ friends. Government can much more successfully solve the problems facing such colluders against consumer interests because it can use coercion. That is why our government is also an enemy of domestic consumers when it creates or sustains protectionist policies. Businessmen, left solely to their devices, frequently fail in such attempts. Importantly though, history has shown effective collusion against rivals to be quite difficult to create and sustain, because of the difficulties in establishing and maintaining agreement over a host of policies and actions, controlling members’ incentives to “cheat” on such agreements and excluding entrants who would outcompete them. Yet domestic producers frequently treat those consumer benefactors as bitter enemies. Improving on the offers of others, they advance buyers’ interests. In contrast, the only clear friends of consumers are those who offer better combinations of price and product to them. Competition open to everyone’s voluntary offers undermines businesses’ ability to abuse their consumers. As Adam Smith famously noted in his Wealth of Nations, “People of the same trade seldom meet together…but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” That is why Smith endorsed market competition, while criticizing the behavior of businessmen who favored restricting it. How are domestic producers so frequently domestic consumers’ enemies? It is in their interest to restrict competition for consumer patronage, raising their prices and profits, to the detriment of consumers. Our supposed enemies, foreign producers, are actually our friends, and our supposed friends, domestic producers and the US government, are actually our enemies.
Unfortunately, the patriotic protectionism story confuses American consumers’ friends and enemies. Consequently, as Leonard Read put it, “Consumer interest is the premise from which all economic reasoning should proceed,” and since “my interest is progressively served by an increase of goods and services obtainable in willing exchange for my offerings…As a consumer, I choose freedom.” And our joint interests as consumers is what we have most in common. But that leaves an important group out of the political equation–American consumers. Such policies are based at least in part on the idea that “good” American producers should be given special treatment over “bad” foreign producers for the good of our country.
But all recent Presidents have continued a long line of protectionist policies, and Joe Biden is clearly on that list. Few Presidents have wrapped their protectionism in the American flag to the extent Donald Trump did.
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